Mis-Leveraged Outsourcing

“The biggest leverage a manufacturing company has is the ability to outsource.” – Ivan Feinseth, Matrix USA

I could almost end the post without commenting, as I can safely assume all Evolving Excellence readers are smart enough to see the blatant absurdity in such a statement.

The quote came from an article in the October 9th issue of Business Week that described the problems at Goodyear. The United Steelworkers have threatened to strike (Update: they are now on strike) over health and retirement benefits. Goodyear has been aggressively outsourcing production to Latin America and Asia, and therefore basically has the ability to tell the union to take a hike.

What a waste.

And “waste” is the operative word. I don’t know the particulars of the benefits issue. Perhaps the package is excessive and no longer realistic. I also don’t know all the reasons for outsourcing. Perhaps it is to get closer to customers in Latin America and Asia, which can be a worthwhile endeavor. But a strike is still a waste, and those of us in the lean community are driven to reduce waste.

A strike indicates a failure of management. Perhaps a failure to negotiate benefits that are appropriate for the long-term health of the company. Most likely a failure to create a collaborative and trusting partnership between management and the shop floor teams to create mutual success.

Outsourcing as leverage? Outsourcing, unless as noted above to get closer to the customer, is also a failure. It means you can’t produce as efficiently as someone else. You have failed with methods, knowledge, or systems to even match the efficiency of the outsourcing facility. Your costs are so high that it overshadows the extra costs associated with bloated supply chains and the infrastructure required to support the outsourcing. Of course that assumes you even realize that those extra costs exist.

The biggest leverage a manufacturing company has is the ability to harness the collective creative knowledge of its employees to create excellence and eliminate waste.